The move by Washington and Colorado in 2012 to legalize the recreational use of marijuana was a big one. And not just in the most obvious ways. The ripple effects are changing things all overMost notably, the ability for growers to completely revolutionize their operations. Cultivators in legal states and Canada are now in a position to make long term investments in their operations, leveraging the best agricultural techniques and technology available.
Nowhere is this more notable than it is for indoor growers. Equities.com got a chance to talk with Staffan Hillberg, the CEO of Heliospectra ($HLSPY), a leading supplier of LED lights for indoor plant growers of all kinds, about how the cultivation industry is likely to change as .
EQ: With four states legalizing recreational use, how do you see grow operations changing? How much room is there to improve efficiency and yields through better agricultural technology?
Staffan Hillberg: As the industry is legalized, growers will be able to invest long-term, which they couldn’t do before. They will be able to increase their revenues and lower their costs like any business basically. Repeatability and consistent results is key to running a professional operation, so that means growing protocols and technology will become very important for these growers. With our technology, you can vastly reduce the energy consumption in a grow operation.
By using Heliospectra LED lights, you can reduce electricity consumption by up to 50%. And since our lights don’t have any heat in the beam, there’s reduced investment in HVAC, in cooling systems, plus the electricity and cost to run those cooling systems. Furthermore, the LEDs last more than 50,000 hours, meaning you don’t have to replace the old HPS bulbs anymore. Finally, by optimizing the light recipe for the plants, you continuously reduce the energy consumption even more.
There are estimates that 1 to 2% of the U.S. electricity consumption is being used for growing cannabis, so this is a substantial value for these companies. And utility companies are even going to charge cannabis growers a premium for electricity, meaning the incentives to switch to more efficient technologies is very high. Aside from being more efficient, we can improve the quality of a plant itself as well as increase yields and, interestingly enough, this varies depending on which cannabis strain that you’re growing, so we can tweak our light recipes to customize them for a particular crop. Better efficiency with heat also means reduced water consumption, and water is going to become very important in the future, so we’re going to see changes in this as well.
Finally, I think repeatability and consistency makes it easier for these growers to finance the operations and distribute them geographically, because then you can actually copy and paste these grows and customers and investors will be looking for these types of high quality operations.
EQ: The economic case is pretty clear, but what about the ability to control the quality of the product? How do you think that might improve with better technology that allows growers to have more control?
Staffan Hillberg: For all plants, there are equations that say there need to be balances between light and temperature and other aspects. So it’s really critical to manage the environment, which includes light, of course. So plants will grow under any conditions, but if you really want to optimize your production and grow a really high quality plant, it will be a necessity to control the environment.
So for this reason, in the future, you’ll adapt growing conditions to the strains in order to achieve the specific results a grower is looking for. One of those results is improving the cannabinoid levels, increase or lower THC and CBD levels, and things like taste and terpenes. All these things can be affected by the environment and the lights. We can change the taste of basil through its environment, and it’s the same thing with cannabis.
EQ: For a long time, indoor cultivation was necessitated by the regulatory environment. But with the opportunity to do larger grows outdoors allowed by legalization, what will keep growers working indoors? What sort of advantages are there for an indoor grow that are going to keep some growers operating inside and under lights?
Staffan Hillberg: The big reason for growing indoors is that you can have several harvests per year, because cannabis is what’s called a “short-day plant.” So when the day becomes shorter, the plant knows that it needs to flower and spread its seeds. When you grow indoors, you can repeat the cycle three to four times per year. Now, if you’re growing outdoors, you could stimulate this by using shading, but that’s much more difficult and it’s risky because just a small change in the light cycle can interrupt the flowering of the plant.
We’re seeing cannabis growers moving into greenhouses, where you also need to add this type of shading cloth. Interestingly enough, the biggest reseller of that shading cloth is a Swedish company and the owners are on our board as well, so we know that market really well.
The disadvantage with greenhouses is that it becomes much more difficult to control the environment. We’re seeing traditional greenhouse grows for our vegetables and flowers that are now starting to grow indoors in so-called controlled environment agriculture because it makes it a lot easier for them to control temperature, humidity, CO2, light, etc. It’s also much cheaper to heat up, if you’re at altitude in Colorado, or to cool it down, if you’re in Las Vegas.
Controlling the temperature in a greenhouse is obviously much more difficult. But we’re seeing both environments and just like the traditional greenhouse market, and our technology works as well with both of these types of technologies.
EQ: Your company is in a very interesting position in that you market to the cannabis industry, but that’s not the only market you’re in. You also have certain advantages by being in the ancillary space where you’re not directly handling any of the plants or flowers and therefore side-stepping a lot of sort of regulatory issues. Could you talk a little bit about the opportunity that exists in this ancillary space for companies that are provided a huge opportunity by the growth of the cannabis industry while simultaneously being able to avoid a lot of the limitations that still exist for the companies directly engaged in the growth and sale of marijuana?
Staffan Hillberg: To us, cannabis is just another plant. We’ve been growing vegetables and flowers since 2006 when we started the company. We’ve been selling to research-centric markets, to ag companies, universities, and greenhouses. That said, while cannabis is another plant, it is still the highest margin plant in the world, so it’s very interesting.
During the gold rush, there were companies who were selling the picks and the shovels, and that’s a pretty good comparison. It’s nice not to be involved in the regulatory issues, so we are being driven by the growth in that market, and as the margins are so high, these growers are willing to invest in new technology because the return on investment is really quick for them. With our products, they have a return on investment in between 12 to 18 months. So that’s really quick, which is great of course. It’s slower in the traditional greenhouse market, so cannabis is a wonderful market for us.
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